Benchmarking japan and korea telecommunication business for 3g in china
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Master Thesis Seminar. Benchmarking Japan and Korea Telecommunication Business for 3G in China. Author: Jiannan Zhao Supervisor: Prof. Patric Östergård Instructor: Vesa Riihimäki, M.Sc. (Tech). Communications Laboratory, HUT ,Finland 2005-06-02. Agenda.

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Benchmarking japan and korea telecommunication business for 3g in china

Master Thesis Seminar

Benchmarking Japan and Korea Telecommunication Business for 3G in China

Author: Jiannan Zhao

Supervisor: Prof. Patric Östergård

Instructor: Vesa Riihimäki, M.Sc. (Tech)

Communications Laboratory, HUT ,Finland 2005-06-02


Agenda

Agenda

Japan and Korea Telecom Business

China Telecom Industry

Thesis Structure

Questions and Answers

Communications Laboratory, HUT ,Finland 2005-06-02


Thesis structure

Thesis Structure

  • INTRODUCTION

  • TELECOMMUNICATION SYSTEMS AND 3G SERVICES

  • TELECOM BUSINESS IN JAPAN & KOREA

  • THE DEVELOPMENT OF CHINESE TELECOMMUNICATON INDUSTRY

  • CONCLUSIONS

Communications Laboratory, HUT ,Finland 2005-06-02


Why japan and korea

Why Japan and Korea ?

  • Markets are saturating between 70-90% of population

  • Also saturation in high to mid-value customers in developing markets

  • Prepay growth is driving down ARPU

    • Prepay revenues third or less of contract revenues

Industry Criterion -- ARPU

Average Revenue Per User

Communications Laboratory, HUT ,Finland 2005-06-02


Benchmarking japan and korea telecommunication business for 3g in china

Reason for why Japan and Korea

Their telecom industries are MATURE !

Communications Laboratory, HUT ,Finland 2005-06-02


What maturity means

In developing countries, a two-speed market

Saturation in mid-to-high end

Growth in low end users

Pressure on margins/ARPU/network

Shift in management focus

Customer retention - not acquisition

Segmentation

Regulation

Mobile termination, USO, 3G rollout

Bundling by full service operators - squeeze mobile only players

Prepare for industry consolidation

Most countries will only sustain 2 to 3 mobile operators per market

Focus on high-profit customers

Growing “wallet share” rather than market share

Maintain opex and capex discipline

Scale critical

Limited scope for differentiation

Increased volume traffic

but revenues don’t grow at the same pace

What maturity means...

The Challenge

Requires a new approach

Communications Laboratory, HUT ,Finland 2005-06-02


Japan and korea telecom business japan telecom industry and key player

Japan and Korea Telecom Business- Japan Telecom Industry and Key Player

Industry situation

  • The exploiter and leader in terms of telecom business

  • Both W-CDMA and CDMA2000 networks are supported

  • 3G first mover – NTT DoCoMo

Core Business and Strategies of NTT DoCoMo

  • i-mode and FOMA

  • Regulations

  • Cooperation

  • Value chain management

  • Service innovation

  • Pricing system

Communications Laboratory, HUT ,Finland 2005-06-02


Japan and korea telecom business japan telecom industry and key player1

Japan and Korea Telecom Business- Japan Telecom Industry and Key Player

  • Regulation

    Establish industrial association

    Laws

  • Cooperation

    NTT DoCoMo has built a strong competitive advantage through forging close relationships with a wide range of companies. Synchronization makes DoCoMo’s stakeholders having their interests aligned with the end-customer and committing in maximizing value and continually upgrading the quality of all services and products

Communications Laboratory, HUT ,Finland 2005-06-02


Japan and korea telecom business japan telecom industry and key player2

Japan and Korea Telecom Business- Japan Telecom Industry and Key Player

  • Value chain management

    NTT DoCoMo manages the value chain by closely collaborate with other telecom actors, enabling all parties involved in the value chain

  • Service content innovation

    All contents are continually developed and authorized by itself, kept as comprehensive as possible, and designed for maximum clarity and attractiveness

Communications Laboratory, HUT ,Finland 2005-06-02


Japan and korea telecom business japan telecom industry and key player3

Japan and Korea Telecom Business- Japan Telecom Industry and Key Player

  • Appropriate pricing system

    NTT DoCoMo tailors its services with suitable cost then offers high quality services at optimum price

    These usage charges are based on the volume of data sent/received rather than on time spent connected

    DoCoMo is charged by each content provider based on users’ utilization but all the billing issues are under DoCoMo’s control

Communications Laboratory, HUT ,Finland 2005-06-02


Japan and korea telecom business korea telecom industry and key player

Japan and Korea Telecom Business- Korea Telecom Industry and Key Player

Industry situation

  • The exploiter and leader in terms of telecom business

  • Concentrates on CDMA2000 but also supports W-CDMA

  • Leading player - SKT

Core business and core competence of SKT

  • SKT main services: Ting/ TTL/ June/ NATE etc.

  • Core Competence

  • - brand equity

  • - technology pioneer

  • - cooperation

Communications Laboratory, HUT ,Finland 2005-06-02


Stranded with 3g strategies

Low credibility

Limited access to capital

No compelling reason to buy

Stranded with 3G strategies

trade-off ?

Capacity

relief

Mass marketmultimedia

  • Better business case

  • Coverage requirements

  • No cheap, simple 3G phones

Communications Laboratory, HUT ,Finland 2005-06-02


Telecom business development

Industry

Regulation

Cooperation

Value Chain

Economic

Competition

Technology

innovation

Environment

Telecom Business Development

  • Regulation is always is leading factor – Show the direction

  • Value Chain Management – Maximum the opportunity of every player getting money

  • Cooperation

  • Competition

  • R&D

  • Economics

Telecom Business

Development

Communications Laboratory, HUT ,Finland 2005-06-02


Chinese telecom industry market attractiveness

Chinese Telecom Industry - Market Attractiveness

World Most Attractive Market

  • Massive population

  • Continuous deregulatory reforms of industry

  • Booming economics

  • Coverage requirements

  • Daily technical innovation

Communications Laboratory, HUT ,Finland 2005-06-02


Chinese telecom industry td scdma china 3g standard

Chinese Telecom Industry - TD-SCDMA, China 3G standard

China’s TD-SCDMA Standard Opportunities & Challenge

TD-SCDMA was proposed by the China Wireless Technology Standard (CWTS) Group in 1998, approved by ITU in May 2000, and joined 3GPP in March 2001, as one of the three 3G transmission standards

  • Opportunities

  • Own property right

  • Support from big players

  • Technical advantages

  • Challenge

  • Short history, less experience

  • Poor quality of handsets by operators and manufacturers, loose cooperation

Communications Laboratory, HUT ,Finland 2005-06-02


Chinese telecom industry difference from japan korea

Chinese Telecom Industry - difference from Japan & Korea

  • Different protocols

Telecom industry development history

Regulatory policy

Economic and demographic situation

Industrial operation model

Communications Laboratory, HUT ,Finland 2005-06-02


Key players on the value chain

Key players on the value chain

Communications Laboratory, HUT ,Finland 2005-06-02


Chinese telecom industry challenges in china

Chinese Telecom Industry - Challenges in China

  • Competition in the handset market

    • Putting extreme pressure on margins

  • Building a business case for 3G

    • Coverage matched with low-end handsets?

    • Thin rollout in urban areas for high-value markets?

  • Multiple networks

    • Managing platforms, applications, interoperability across W-CDMA, EV-DO, TD-SCDMA networks

  • Developing a low-end, voice only 3G handset

    • It represents a market opportunity

Communications Laboratory, HUT ,Finland 2005-06-02


Steady growth in handset shipments

Steady growth in handset shipments

  • At last some serious drivers

    • Colour is good

    • MMS services launched

    • Multimedia portals

  • Replacement rate has risen

    • More attractive product at high end …

    • … and at the low end

  • By 2004 China/India has 18% of global handset shipments

120,000

100,000

80,000

'Feature' phones

60,000

Voice-centric

40,000

phones

20,000

0

2002

2003

2004

2005

2006

2007

Source: ovum


Chinese telecom industry marketing projection of china s 3g services

Chinese Telecom Industry - Marketing Projection of China's 3G Services

  • Mobile gaming

  • Mobile financial services

  • Mobile commerce

  • Mobile learning

  • Traffic management

  • Mobile health care services

Source: ovum

Communications Laboratory, HUT ,Finland 2005-06-02


Conclusions

CONCLUSIONS

  • Regulatory policies development needed

  • Leading role on the value chain

  • Fair competition is a prerequest

  • Technology innovation

  • Close cooperation with handsets manufacturers

    Operators increasingly want customised devices

    • Proven success in Japan and Korea

    • Point of differentiation in a mature market

    • Allows for a better market segmentation strategy

    • provides more device cost control

  • Service portfolio development

Communications Laboratory, HUT ,Finland 2005-06-02


Benchmarking japan and korea telecommunication business for 3g in china

Questions and Comments ?

Communications Laboratory, HUT ,Finland 2005-06-02


Benchmarking japan and korea telecommunication business for 3g in china

Thanks for your attention and being here !

Welcome to China !

Communications Laboratory, HUT ,Finland 2005-06-02


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